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Asset Protection in Estate Planning

The Spectrum article by Brent Shakespeare

Asset-ProtectionYou’re beginning to accumulate substantial wealth, but you worry about protecting it from future potential creditors.

Whether your concern is for your personal assets or your business, various tools exist to keep your property safe from tax collectors, accident victims, health care providers, credit card issuers, business creditors, and creditors of others.

To insulate your property from such claims, you’ll have to evaluate each tool in terms of your own situation. You may decide that insurance and a Declaration of Homestead may be sufficient protection for your home because your exposure to a claim is low. For high exposure, you may want to create a business entity or an offshore trust to shield your assets. Remember, no asset protection tool is guaranteed to work, and you may have to adjust your asset protection strategies as your situation or the laws change.

Liability insurance is your first and best line of defense

Liability insurance is at the top of any plan for asset protection. You should consider purchasing or increasing umbrella coverage on your homeowners policy. For business-related liability, purchase or increase your liability coverage under your business insurance policy. Generally, the cost of the premiums for this type of coverage is minimal compared to what you might be required to pay under a court judgment should you ever be sued.

A Declaration of Homestead protects the family residence

Your primary residence may be your most significant asset. State law determines the creditor and judgment protection afforded a residence by way of a Declaration of Homestead, which varies greatly from state to state. For example, a state may provide a complete exemption for a residence (i.e., its entire value), a limited exemption (e.g., up to $100,000), or an exemption under certain circumstances (e.g., a judgment for medical bills). A Declaration of Homestead is easy to file. You pay a small fee, fill out a simple form, and file it at the registry where your deed is recorded.

Dividing assets between spouses can limit exposure to potential liability

Perhaps you work in an occupation or business that exposes you to greater potential liability than your spouse’s job does. If so, it may be a good idea to divide assets between you so that you keep only the income and assets from your job, while your spouse takes sole ownership of your investments and other valuable assets. Generally, your creditors can reach only those assets that are in your name.

Business entities can provide two types of protection

Consider using a corporation, limited partnership, or limited liability company (LLC) to operate the business. Such business entities shield the personal assets of the shareholders, limited partners, or LLC members from liabilities that arise from the business. The liability of these owners will be limited to the assets of the business.

Conversely, corporations, limited partnerships, and LLCs provide some protection from the personal creditors of a shareholder, limited partner, or member. In a corporation, a creditor of an individual owner is able to place a lien on, and eventually acquire, the shares of the debtor/shareholder, but would not have any rights greater than the rights conferred by the shares.

In limited partnerships or LLCs, under most state laws, a creditor of a partner or member is entitled to obtain only a charging order with respect to the partner or member’s interest. The charging order gives the creditor the right to receive any distributions with respect to the interest. In all respects, the creditor is treated as a mere assignee and is not entitled to exercise any voting rights or other rights that the partner or member possessed.

Certain trusts can preserve trust assets from claims

People have used trusts to protect their assets for generations. The key to using a trust as an asset protection tool is that the trust must be irrevocable and become the owner of your property. Once given away, these assets are no longer yours and are not available to satisfy claims against you. To properly establish an asset protection trust, you must not keep any interest in the trust assets or control over the trust.

Trusts can also protect trust assets from potential creditors of the beneficiaries of the trust. The extent to which a beneficiary’s creditors can reach trust property depends on how much access the beneficiary has to the trust property. The more access the beneficiary has to the trust property, the more access the beneficiary’s creditors will have. Thus, the terms of the trust are critical.

There are many types of asset protection trusts, each having its own benefits and drawbacks. These trusts include:

  • Spendthrift trusts
  • Discretionary trusts
  • Support trusts
  • Personal trusts
  • Self-settled trusts

Since certain claims can pierce domestic protective trusts (e.g., claims by a spouse or child for support and state or federal claims), you can bolster your protection by placing the trust in a foreign jurisdiction. Offshore or foreign trusts are established under, or made subject to, the laws of another country (e.g., the Bahamas, the Cayman Islands, Bermuda, Belize, Jersey, Liechtenstein, and the Cook Islands) that does not generally honor judgments made in the United States.

A word about fraudulent transfers

The court will ignore transfers to an asset protection trust if:

  • A creditor’s claim arose before you made the transfer.
  • You made the transfer with the intent to defraud a creditor.
  • You incurred debts without a reasonable expectation of paying them.

- This material was prepared by Raymond James for use by Brent Shakespeare of Raymond James Financial Services, Inc.


Posted by:  Steven Maimes, The Trust Advisor


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Atlantic Trust Receives Delaware Trust Charter

New trust company offers wealthy families the benefits of Delaware law

Atlantic Trust, the U.S. private wealth management division of CIBC, announced today that it has received a Delaware limited purpose trust charter, enabling the firm to offer trust services beyond that already provided by its national trust company.

The state of Delaware has long been known as a leader in trust laws, offering wealthy clients more advantageous tax benefits, investment flexibility, control over trust terms and asset protection.

“As a leading advisor to families of wealth, Atlantic Trust is pleased to offer this important and valuable new trust service that can help our clients protect and maximize their wealth,” said Jack Markwalter, chairman and CEO of Atlantic Trust. “We’re so pleased to introduce this service and to announce that it’s being led by two senior and experienced professionals already in our firm, people who know our clients very well and their expectations on quality and service.”

Leading the Delaware trust team are Dee Ann Schedler, managing director and head of Atlantic Trust’s Wilmington office, and Gabrielle Bailey, wealth strategist and director of Delaware Trust Services.

“Although our status as a nationally chartered trust might have been sufficient, we decided that the more prudent way to go was to also obtain a Delaware trust charter,” said Markwalter. “Other states have attractive trust laws, but Delaware has always been considered a preferred jurisdiction for trust and estate attorneys because of its trust law flexibility and significant body of case law and excellent Chancery Court.”

Schedler has 28 years of industry experience and joined the firm in 2004. Bailey has more than 15 years of industry experience and joined Atlantic Trust in 2003. Reema Antonelli also recently joined the Wilmington team as a senior client service manager.

About Atlantic Trust

Atlantic Trust is one of the nation’s leading private wealth management firms, offering integrated wealth management for high-net-worth individuals, families, foundations and endowments. The firm considers clients’ financial, trust, estate planning and philanthropic needs in developing customized asset allocation and investment management strategies. Experienced professionals deliver a broad range of solutions, including proprietary investment offerings and a robust open architecture platform of traditional and alternative managers. Atlantic Trust operates in 13 full-service locations throughout the U.S. with $27.0 billion in assets under management (as of March 31, 2015). For more information, visit

About CIBC

CIBC is a leading Canadian-based global financial institution. Through our Retail and Business Banking, Wealth Management and Wholesale Banking businesses, CIBC provides a full range of financial products to individual, small business, commercial, corporate and institutional clients in Canada and around the world. CIBC owns a 41 percent equity interest in American Century Investments®, a major U.S. asset management company, serving financial intermediaries, institutions and individuals, and acquired Atlantic Trust, a premier U.S. private wealth management firm, in January 2014. You can find other news releases and information about CIBC in our Media Centre on our corporate website at

Source:   Atlantic Trust Private Wealth Management

Posted by:  Steven Maimes, The Trust Advisor



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How Artificial Intelligence Will Eliminate The Need For The Vast Majority Of Life Insurance Agents

Forbes article by Russ Alan Prince

insAll the professions are going to be reconfigured by artificial intelligence. The result will be fewer professionals and many of their roles “downgraded.”

Advances in artificial intelligence, also known as cognitive computing, are starting to cause a seismic shift in the professions. The eventual result is the eradication of many positions and the changing – usually lesser – roles for the “survivors” of this transformation.

All the professions such as investment advisors and accountants will be impacted. Life insurance agents will also be severely affected. While this paradigm shift is going to take years and is dependent on technological innovation, coupled with the speed of complementary social change, it is an eventuality.

The ability to source and construct life insurance portfolios, facilitate underwriting, and monitor policies can all be accomplished by the robo-life agent. Such an approach would often prove to be both substantially more efficient, a way to provide superior solutions, and considerably less expensive. It is these critical reasons, the vast majority of life insurance agent of today will, in time, become a relic of a previous generation.

There will be strong and determined opposition to this industry transformation. Certainly, many of today’s life insurance agents will do everything in their power to fight back. They will likely slow down the process, somewhat. Moreover, many of the life insurance carriers will also push back for this evolution of the distribution system will severely and detrimentally impact some of them resulting in consolidation. Nevertheless, advances in cognitive computing will ultimately make this industry transformation a fait accompli.

It is important to note, that even as today’s life insurance agents succumb, robo-life insurance agents will predominantly not directly replace them. People can certainly buy life insurance direct, but that is not having a meaningful effect on the sale of life insurance by agents. As the saying goes: “Life insurance is sold, not bought.” What will likely happen is that other professionals – primarily attorneys and secondarily accountants – will incorporate the services of robo-life insurance agent into their practices. Instead of taking a commission, they will take a dramatically lower fee. The significant cost savings will be passed onto the purchasers. It is also important to keep in mind that the traditional business models of attorneys and accountants will also be upended by artificial intelligence.

None of this is going to happen quickly. However, it will occur incrementally, and when it does occur the life insurance agent of today will pretty much become an anachronism. This will certainly be the case as the commission structure that supports agent-based distribution of life insurance is eradicated.

Very importantly… there will be exceptions. There will be a select percentage of innovative, forward-thinking life insurance agents who will leverage the technology and the accompanying changing industry dynamics to create tremendous value for others. These agents will, consequently, create considerable personal fortunes providing life insurance.


Posted by:  Steven Maimes, The Trust Advisor


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US Labor Department Seeks Public Comment on Proposal to Protect Consumers From Conflicts of Interest in Retirement Advice

bad-investment-advice-due-to-conflict-of-interestThe U.S. Department of Labor has released a proposed rule that will protect 401(k) and IRA investors by mitigating the effect of conflicts of interest in the retirement investment marketplace. A White House Council of Economic Advisers analysis found that these conflicts of interest result in annual losses of about 1 percentage point for affected investors — or about $17 billion per year in total.

Under the proposals, retirement advisers will be required to put their clients’ best interests before their own profits. Those who wish to receive payments from companies selling products they recommend and forms of compensation that create conflicts of interest will need to rely on one of several proposed prohibited transaction exemptions.

“This boils down to a very simple concept: if someone is paid to give you retirement investment advice, that person should be working in your best interest,” said Secretary of Labor Thomas E. Perez. “As commonsense as this may be, laws to protect consumers and ensure that financial advisers are giving the best advice in a complex market have not kept pace. Our proposed rule would change that. Under the proposed rule, retirement advisers can be paid in various ways, as long as they are willing to put their customers’ best interest first.”

Today’s announcement includes a proposed rule that would update and close loopholes in a nearly 40-year-old regulation. The proposal would expand the number of persons who are subject to fiduciary best interest standards when they provide retirement investment advice. It also includes a package of proposed exemptions allowing advisers to continue to receive payments that could create conflicts of interest if the conditions of the exemption are met. In addition, the announcement includes a comprehensive economic analysis of the proposals’ expected gains to investors and costs.

The proposed “best interest contract exemption” represents a new approach to exemptions that is broad, flexible, principles-based and can adapt to evolving business practices. It would be available to advisers who make investment recommendations to individual plan participants, IRA investors and small plans. It would require retirement investment advisers and their firms to formally acknowledge fiduciary status and enter into a contract with their customers in which they commit to fundamental standards of impartial conduct. These include giving advice that is in the customer’s best interest and making truthful statements about investments and their compensation.

If fiduciary advisers and their firms enter into and comply with such a contract, clearly explain investment fees and costs, have appropriate policies and procedures to mitigate the harmful effects of conflicts of interest, and retain certain data on their performance, they can receive common types of fees that fiduciary advisers could otherwise not receive under the law. These include commissions, revenue sharing, and 12b-1 fees. If they do not, they generally must refrain from recommending investments for which they receive conflicted compensation, unless the payments fall under the scope of another exemption.

In addition to the new best interest contract exemption, the proposal also includes other new exemptions and updates some exemptions previously available for investment advice to plan sponsors and participants. For example, the proposal includes a new exemption for principal transactions. In addition, the proposal asks for comment on a new “low-fee exemption” that would allow firms to accept conflicted payments when recommending the lowest-fee products in a given product class, with even fewer requirements than the best interest contract exemption.

Finally, the proposal carves out general investment education from fiduciary status. Sales pitches to large plan fiduciaries who are financial experts, and appraisals or valuations of the stock held by employee-stock ownership plans, are also carved out.

Links to the proposed fiduciary rule, prohibited transaction exemptions, economic impact analysis and other materials are available at


Posted by:  Steven Maimes, The Trust Advisor



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Three Things the Wealth Management Industry Isn’t Telling You

Observer opinion article by Barnaby B. Riedel

wealth-industry_veWhat is the meaning of a financial life? While it may sound like a question for philosophers (or teenagers taking philosophy), its in fact foundational to an entire industry wanting to help you (and me) achieve financial success.

I’m talking about the wealth management industry—that assortment of financial services that includes everything from tax accounting to life insurance to estate planning. Whether you realize it or not, when you enter into a relationship with a wealth management professional you enter into a tacit agreement about the meaning of your financial life. Here is that agreement in broad strokes:

  • Your financial life is about money. Financial problems have financial solutions and there’s no problem more money can’t solve.
  • Your financial life is about saving and investing. Protecting and growing your assets is the task at hand and if you do it well you’ll be O.K.
  • Your financial life is about achieving financial independence. A future state in which economic anxiety will be alleviated because you’ve (finally) reached “your number.”

These are seductively straightforward and optimistic assumptions: Stay focused on saving and investing and eventually you’ll have the life that you want. (Picture the ad featuring the handsome couple, champagne flutes in hand, peering into the distance of from the bow of a perfectly white yacht and you get the idea.) But is this the story that will help us make better financial decisions and get us the life that we want?

A wealth management company recently asked me to conduct research about people’s financial lives; it believed the financial industry to be out of touch with people’s experiences and wanted objective research for deeper understanding of the discrepancy. While they set parameters around the kinds of people they wanted to study (wealthy individuals with a minimum of $500,000 in investable assets) they set no limits on methodology, which left me with the question of how to study the meaning of a financial life.

If you want to know what something means to a person (home, family, love, fatherhood), get them to tell you a story about it. Because I needed to understand the meaning of people’s financial lives, I needed to collect stories—a lot of them. And so for several months I led the wealthy through an exercise. I asked them to think of their financial life as a story, to break that story up into chapters and to give each chapter a high point, a low point and a turning point.

What I found proved surprising. The wealth management industry’s assumptions were woefully incomplete. What’s more, they were the stuff of classically bad financial decision-making. Here are three things you need to know that the wealth management industry isn’t telling you.

1) Your financial life is not about money. It’s about balancing the pursuit of money with other limited and competing resources. When I asked people to tell me the story of their financial life, 93 percent told me about their entire life. By often focusing exclusively on money, the wealth management industry addresses only a fraction of what our financial lives (and financial problems) are about. They fail to warn us about the consequences and trade-offs we will either knowingly or unknowingly make when we define our financial lives solely in terms of money. I interviewed too many people who were unaware of the trade-offs they were making until it was too late—marriages gone stale, children raised on credit cards, irreversible health conditions from stress, etc. What the desperate pursuit of money ignores is that more money can sometimes mean less life.

2) Your financial life is not about saving and investing. It’s about working and spending. In fact, the bulk of people’s financial lives (around 90 percent of the high points and low points) revolved around working and spending—promotions at work, family vacations, tyrannical bosses, etc. By focusing on saving and investing, the wealth management industry often encourages us to do better in the areas that matter least to how we will evaluate our lives. While saving and investing are important, when people didn’t pay attention to the choices they made in the areas of working and spending, they experienced the deepest regrets, such as working too much and not being around for their kids, or not being present in their marriage and blowing money to keep apace with the neighbors.

3) Financial independence will not ensure your happiness. Many of the people I interviewed did not feel good about their financial lives (regardless of the amount of money they had). Instead, the difference between those who achieved a sense of well-being and those who didn’t was a function of how well they handled the trade-offs in life. Indeed, 83 percent of the turning points collected involved a trade-off of some kind: Do I work longer hours for more money or spend that time with family? Should we buy a bigger home in the country or a cottage with a shorter commute? Do we pay for our child’s college or teach her a lesson about responsibility? The meaning of people’s financial lives was determined by the sum of these choices and whether they’d made decisions about them that reflected their values. While the wealth management industry offers us guidance on how to protect and grow our assets, it offers no guidance on how to make these most important of financial decisions.

Clearly, there is both opportunity and need for a new category of wealth management—one that helps people achieve more meaningful financial lives based on what’s actually meaningful to them. But it won’t be easy to market this set of financial life services because, as it turns out, what gives our financial lives meaning is a truth very few in the wealth management industry will feel comfortable telling us: you can’t have it all and it’s not really about the money.

- Barnaby B. Riedel, Ph.D. is co-founder of Riedel Strategy in Newport Beach, Calif.


Posted by:  Steven Maimes, The Trust Advisor


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How To Tell If Retirement-Income Funds Are Right For You

MarketWatch article by Robert Powell

retirement-savingsWith all the back and forth over whether to withdraw 4% from your portfolio in your golden years, few would blame you if you simply threw in the towel and put your money in a managed payout fund.

Those are funds that, at least on paper, are supposed to provide you with a steady stream of income, say 4%, over the course of your retirement. And in doing so, you presumably wouldn’t have to worry about asset allocation or outliving your money or any of the other issues that plague retirees trying to use what’s called a systematic withdrawal plan or SWiP.

Managed payout funds were introduced about the same time target-date funds hit the scene. These funds were designed to pick up where target-date mutual funds left off. Target-date fund would get you to retirement and managed payout, also known as retirement-income, funds would take you the rest of the way, till death do you part.

Kathleen McNamara, Sr. Municipal Bond Strategist for UBS, talks about some of the risks bond investors should be keeping an eye on.

If you’re overwhelmed by the prospect of deciding how much to withdraw from your investment accounts during retirement, worried about outliving your assets, should you consider these funds?

Well, as with most things having to do with money, the answer really depends on your household’s individual situation. But, what we can tell you is this:

  • You’ll have to decide which, among the three main types of retirement-income funds, is right for you.
  • You’ll have to examine the pros and cons of these funds.
  • Then, you’ll have to figure out which specific fund is best for you.

Three main types of retirement-income funds

According to Morningstar, retirement-income funds come in three flavors: Target-date retirement funds, some of which are designed to help investors get through retirement and others of which are designed to get investors to retirement; income-replacement funds; and managed payout funds.

Here’s how Kathryn Spica, a chartered financial analyst and senior analyst at Morningstar in Chicago, described these funds in 2014:

“Target-date retirement funds: Retirement-income funds are often the final landing point of a target-date series’ glide path. These are distinct vehicles that merge with the final dated fund in the series, either at retirement or — as in the case where the final dated fund continues to roll down the equity allocation — after a pre-specified number of years. Not all series have a separate retirement-income fund, though. For example, AllianceBernstein continues to offer 2000 and 2005 dated funds, which stay in the Morningstar Target Date 2000-2020 category.

“Similarly to conservative-allocation funds, target-date retirement funds do not have an explicit income goal and are designed to provide broad exposure across asset classes, allowing for income as well as appreciation. As such, these funds tend to have a lower yield than other options in the category. Target-date investors should note the final equity allocation in their series, as it can dramatically affect the performance of their investment throughout retirement.

“Income-replacement funds: Perhaps best described as a reverse target-date fund, an income-replacement fund will gradually return your money plus any income and capital gains before it liquidates in a designated year. Fidelity offers 14 such funds at two-year intervals that invest in a broad array of Fidelity funds. Pimco offers two options, one maturing in 2019 and one in 2029, which invest almost entirely in Treasury inflation-protected securities (TIPS). These funds can have extremely high yields, but can also deliver steep losses, as Pimco’s offerings did as TIPs sold off last year.

Managed-payout funds: Managed-payout funds provide monthly income with room for investment growth. When the market slows or drops, however, the fund can cut its payout or return your capital. The 12-month yield of each fund provides an idea of just how much income these funds have doled out. For example, Schwab offers three managed payout options, with distribution targets ranging between 3% and 6% annually. The series has had a tough time hitting those payout hurdles given the low-interest-rate environment of recent years.

“In contrast, Vanguard Managed Payout has maintained a relatively aggressive profile and its hefty exposure to stocks (54% as of the end of 2013) along with a surging equity market in recent years has helped it maintain a payout level close to its target. (It has also had to return shareholder capital to retain its targeted payout rate at times.) The fund’s trailing three-year performance determines its payout amount and the firm recently cut the fund’s target distribution to 4% from 5% in January 2014, reflecting more modest return expectations for stocks and bonds. At that time the firm also consolidated its two other managed-payout funds into this fund to create a single fund.”

So what’s so good about these funds?

In general, these funds are professionally managed; you don’t have to worry about asset allocation, rebalancing or the distribution strategy, said Joe Tomlinson, a certified financial planner, actuary and managing member at Tomlinson Financial Planning in Greenville, Maine. Plus, expenses — though not rock-bottom — are low, Tomlinson said.

These funds also help you address the anxiety that comes with figuring out a safe withdrawal rate. “They take away the potentially difficult process of figuring out your own drawdown amount,” said Spica.

What’s more, Tomlinson said, these funds are designed to deliver not just a stable payout, but one that keeps pace with inflation.

Plus, managed-payout funds work well for do-it-yourselfers, retirees who want to generate income from their portfolio but aren’t interested in working with an adviser, said David Blanchett, head of retirement research at Morningstar Investment. “Similar to target-date funds, managed payout funds simplify the investment decisions for investors, which in general is a good thing,” he said.

And perhaps best of all, you’ll get monthly income without giving up control of your assets, as you would with annuities, Tomlinson said.

The downsides

One big negative is that there are no guarantees for these products; they can lose money and/or cut their payouts at any time, Spica said.

Plus, such funds don’t really address the complexities of retirement and how retirees typically spend money in retirement. “Retirement is much more complex than accumulation,” Blanchett said. “I think that target-date funds can work for many investors in accumulation, and while there are differences in the glide paths for different target-date series, the largest glide paths and allocations are relatively similar.”

In contrast, retirement is far more complex than accumulation, and there are significant differences in funds geared toward generating retirement income, said Blanchett, who noted that Morningstar’s “retirement-income” category is the most diverse category that exists from an allocation difference perspective across funds.

Consider: The Vanguard Managed Payout funds has an allocation that is about 77% equities, he said. “This is an incredibly aggressive allocation for a retiree, and one that many investors may not be aware of,” he said. “That is, they would think that since it’s targeted toward retirees and generating a payout, it would be more conservative.”

In other words, picking the right fund requires much more due diligence than retirees might think is required at first blush. And that, said Blanchett, “takes away from the ‘do-it-for-me’ potential benefit of these investments.”

Mike Piper, author of the Oblivious Investor blog, has a take on this fund too. Read: A Look at Vanguard’s Managed Payout Fund.

Tomlinson said there are other negatives, which in the main, outweigh the positives associated with managed-payout funds. One is expenses, he said. Plus these products lack the benefit of longevity pooling and assured inflation-adjusted income that an inflation-adjusted single premium income annuity (SPIA) would provide.

Experts including Blanchett, Wade Pfau, a retirement-income professor at the American College and Michael Finke, a professor at Texas Tech University, have questioned the viability of taking withdrawals based on the 4% rule with current low interest rates and current high stock market valuations.

There is also the risk in using these funds to cover basic living expenses. If the payout goes down and the cost of your basic living expenses goes up or even stays the same, your standard of living will likely less than you planned for or desired. In short, it would be far better to use payout funds to cover discretionary expenses rather essential expenses. For basic living expenses, Tomlinson said he prefers to use SPIAs. “In my view the ‘cons’ outweigh the ‘pros,’” said Tomlinson.

- Robert Powell is editor of Retirement Weekly, published by MarketWatch.


Posted by:  Steven Maimes, The Trust Advisor


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New Netflix Original Series: Bloodline

bloodlineThe new Netflix original series Bloodline is a dramatic thriller that follows a deeply community rooted family in the Florida Keys, on the edge of the return of the black sheep son, which threatens to expose dark family secrets.

The show includes estate planning themes, such as plot themes revolving around the patriarch’s will and questions of testamentary capacity.

See:  Netflix

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Aging Investors Unprepared to Transfer Wealth to Younger Generation, Advisors Need to Drive Process

Edward Jones and Fidelity Investments Rank Highest in a Tie in Full Service Investor Satisfaction

investorWith an aging full service investor demographic and an anticipated enormous generational transfer of wealth on the horizon, investment firms are not asking the right questions of their clients and may be at risk of losing assets if they fail to establish relationships now with the next generation, according to the J.D. Power 2015 U.S. Full Service Investor Satisfaction Study released today.

The study, now in its 13th year, measures overall investor satisfaction with full service investment firms in seven factors (in order of importance): investment advisor; investment performance; account information; account offerings; commissions and fees; website; and problem resolution. Overall investor satisfaction remains unchanged at 807 (on a 1,000-point scale) from 2014.

With a median age of 61 years among full service investors, investment advisors and firms are missing a tremendous opportunity to position themselves for the anticipated generational transfer of wealth over the next few decades. Despite 71 percent of investors who have named next-gen beneficiaries indicating a willingness to discuss those needs with their advisor, only 42 percent have actually been asked by their advisor to have such a conversation. When advisors ask about the needs of the next generation, not only does the number of contacts with beneficiaries and potentially new clients increase, but overall satisfaction is also higher among investors who are asked than among those who are not asked (854 vs. 793, respectively).

“Talking to clients about their beneficiaries may feel awkward to many advisors, but most investors want their wealth to benefit the next generation,” said Mike Foy, director of the wealth management practice at J.D. Power. “Many times, investors themselves struggle in money-related conversations with their kids, and an advisor is in a unique position to be a bridge between generations. Firms that can effectively train and support their advisors in this regard have a real opportunity to differentiate their services.”


  • There is only a 5 point gap in satisfaction between the highest-ranked investment firms and the industry average (812 vs. 807, respectively), suggesting there is a limited perception of differentiation with the client experience among industry firms.
  • Similar to their lack of preparation for intergenerational wealth transfers, firms are also not proactively preparing for intragenerational wealth transfer events. Nearly one-fourth (23%) of investors say their advisor never interacts with their spouse or partner, missing a tremendous opportunity to retain the household wealth over the long term.
  • Among investors who have named next-gen beneficiaries, 33 percent of the beneficiaries have an account or product with that same firm. The proportion of beneficiary accounts increases by 24 percentage points when advisors ask their investors about beneficiary needs.
  • Women investors are becoming an increasingly important segment of the market, but merely working with a female advisor does not improve their overall satisfaction. According to the study, there’s a greater impact on satisfaction when firms recruit, train and retain advisors of either gender with the skills needed to build trust-based collaborative relationships. Satisfaction is more highly impacted among women investors who say they “work with their advisor as a team” than among men who say the same (+58 vs. +31, respectively).
  • There are generational differences in terms of the trust investors place in their advisors. Slightly more than two-thirds (67%) of Pre-Boomers (born before 1946) indicate their advisor makes recommendations in their best interest, while just 40 percent of Gen Y (1977-1994) and Gen Z (1995-2004) say the same.[1]
  • Higher satisfaction translates into significant increases in advocacy, loyalty and share of investment wallet for firms. Among firms ranking above the industry average, 48 percent of investors say they “definitely will” recommend their firm vs. 37 percent of investors with firms ranking below average.  With respect to loyalty, 46 percent of investors of firms that perform above industry average say they “definitely will not” switch firms, compared with 38 percent of investors with firms that perform below average. While there is only a 2 percentage point gap in share of wallet between above- and below-average firms (86% vs, 84%, respectively), it can translate into a significant increase in a firm’s assets under management.

Study Rankings:

Edward Jones and Fidelity Investments rank highest in a tie in overall investor satisfaction with a score of 812 each. Edward Jones performs particularly well in the investment advisor and investment performance factors, and Fidelity Investments performs particularly well in account information and account offerings. Charles Schwab & Co., Inc. and Wells Fargo Advisors rank third in a tie with a score of 810 each. Raymond James follows scoring 809.

The 2015 U.S. Full Service Investor Satisfaction Study was fielded in January and February 2015 and is based on responses from more than 5,300 investors who make some or all of their investment decisions with an investment advisor.


Posted by:  Steven Maimes, The Trust Advisor


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Former NFL Player Accused In Ponzi Scheme

USA Today article by Kevin McCoy

willFormer NFL player Will Allen and a business associate ran a Ponzi scheme that bilked investors in an alleged fraud based on loans to pro athletes who were short of cash, a federal regulator said Tuesday.

Allen, Susan Daub and their Capital Financial Partners firms raised more than $31 million from investors who were promised annual interest rates as high as 18% on the loans, the Securities and Exchange Commission said in unsealing a federal fraud complaint.

The operation allegedly raised approximately $31.7 million from at least 40 investors from July 2012 through February 2015. But Capital Financial advanced approximately $18 million to athletes during that time, the SEC charged.

As a result, Allen and Daub took in approximately $13.7 million more than they actually loaned to athletes during the nearly three-year span, the SEC said.

The two allegedly withdrew more than $7 million of investors’ money to pay personal expenses, including charges at casinos and nightclubs, or to fund other business ventures.

Investors were often led to believe their investments were backed by the contract of a specific athlete, the SEC charged. While some loans were genuine, at least one allegedly was fake.

At least 24 investors put up more than $4 million in April 2014-May 2014 to fund a purported $5.65 million loan to an NHL player, according to the SEC complaint. However, the loan proved to be a “sham,” the complaint alleged.

Investors were told all payments on the loan had been made in full and on time, even though the NHL player filed for bankruptcy court protection in October 2014, the SEC charged.

In all, Capital Financial paid approximately $20 million to investors, even as the company, Allen and Daub received approximately $13.2 million from loan repayments from the athletes. To fill the nearly $7 million gap, Allen and Daub used money from some investors to pay others, the SEC charged.

“In short, besides using fraud to obtain the investors’ money, Allen and Daub are operating a Ponzi scheme,” the SEC alleged in a 15-page federal court complaint filed April 1 in Boston. U.S. District Judge Indira Talwani approved a freeze of the defendants’ assets on the day of the filing.

According to the SEC’s court complaint, Allen, 36, is a former NFL cornerback who played for the New York Giants and Miami Dolphins between 2001 and 2012. He was signed by the New England Patriots in 2012 but was later placed on injured reserve and ultimately ended his pro career in 2013.

Allen is a founder of the three Capital Financial firms charged in the SEC complaint, as well as four relief defendants.

Daub, 54, is a co-founder of the three Capital Financial defendants and two of the relief defendants. She was registered with the SEC as a representative of various broker-dealers and investment advisers before her involvement with Capital Financial.

The SEC is seeking a court order requiring the defendants to return alleged ill-gotten gains with interest and pay civil monetary penalties.

There was no answer at a phone listed at Allen’s home in Davie, Fla., Tuesday. The phone at Daub’s Coral Springs, Fla., home has been disconnected. There was no immediate response to a message left at Capital Financial’s Boston office, and the SEC did not have information about defense attorneys in the case.


Posted by:  Steven Maimes, The Trust Advisor


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Female Investors Often Beat Men

CNN Money article by Heather Long  

women-investing-One of the biggest conundrums in the financial world is this: Survey after survey shows that women lack confidence when it comes to investing and retirement planning. Yet if you look at the actual results, women often perform better than men.

Caryn Effron has seen this first-hand. A long-time real estate professional, she was motivated to start the website GoGirl Finance after witnessing a discussion between her college-aged son and daughter, and their friends.

The lunchtime chat was a vibrant exchange among all participants. That is, until the topic changed to stocks and investing. Then the young women went silent.

“Ninety percent of the time women don’t participate [in financial discussions]. This is crazy in this day and age,” says Effron, who launched her site in 2009 to encourage women to take charge of their finances.

Women invest wisely: The evidence shows that women are far wiser at investing than they realize. Terrance Odean, a professor at Berkeley’s Haas School of Business who has spent his career studying investor trends, found that men traded 45% more than women in the 1990s. He blamed it on male overconfidence.

All that extra trading actually caused men to have average returns that were a full percentage point lower than women.

Women are also less likely to engage in risky day trading or put their retirement funds entirely in stocks, according to Fidelity’s data. They diversify their portfolios better across stocks, bonds and other investments.

Over the past decade, the median returns for both men and women are 7.3% to 7.4%, according to Fidelity data. But women’s portfolios are much lower risk.

In the investing world, that’s ideal — get the highest return by taking on the least amount of risk.

Women can end up with more: Kathy Murphy, president of Fidelity Personal Investing, is quick to point out that women save more than men on average and their investment portfolios perform as well if not better than men’s.

Females typically save 8.3% of their income, while men only save 7.9%, Fidelity found after looking at over 12 million retirement accounts and adjusting for certain pay disparities between men and women.

chart-men-vs-women-savings-780x439That may not sound like a big difference, but it adds up over time. Consider that the median household income in the U.S. is around $50,000. If you apply those savings rates to the median income, women save about $200 more a year.

So if their returns are about the same, women would end up with more.

The data tell the story: Yet, research by Fidelity backs up what Effron saw at her dining room table. In a new study, Fidelity found that eight in 10 women admit that they held back from talking about their finances, even with close family and friends.

“Despite all the progress women have made in the workforce and otherwise, they still have an unwarranted confidence gap about their ability to engage in financial planning,” says Murphy of Fidelity.

It’s telling that 77% of women report they are confident discussing their health with a doctor on their own, yet less than half feel the same confidence when talking about money and investments with a professional.

A seat at the table: The key is for women to take a seat at the table and participate in the financial conversation.

“Frankly … it’s just not that hard,” Murphy emphasizes.

This isn’t just about gender equality, it’s common sense given the shifting dynamics of American households.

Already 40% of women out-earn their spouses, according to Pew Research, and nine in 10 women are expected to be the sole financial decision maker for their household at some point given that women are staying single for longer and often outliving their partners.


Posted by:  Steven Maimes, The Trust Advisor


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